MANILA – Philippine conglomerates will do a lot of divestments as well as acquisitions in the next 12 months as they adapt to the COVID-19 pandemic, a consultancy firm said on Wednesday.
Noel Rabaja, Strategy and Transactions Service Leader, at SGV & Co. (SGV), one of the country's biggest auditing firms, said many companies are looking to actively pursue merger and acquisition opportunities in the next 12 months.
"And for the conglomerates it will be a combination of acquisitions and divestment," Rabaja said during the virtual launch of the 23rd edition of Ernest and Young Global Limited's (EY) Global Capital Confidence Barometer.
SGV is a member practice of global auditing giant, Ernst and Young.
Rabaja however clarified that they don't see an exodus of investors from sectors that were hit hard by the health crisis, like hospitality and transportation.
"In fact, they may even be looking for more hospitality assets where there's attractive valuation because it's been badly hit by the pandemic," he said.
"Those which are in the airline sector, for example, I don't really expect those conglomerates to do a full divestment of this business. At most, they'll probably be open to entertaining investors in these businesses," he added.
Rabaja also explained the capital that will be raised from these divestments will be used to acquire new businesses such as technology-based companies.
He added that more local companies will expand beyond Philippine shores, to capture any growth opportunities in other countries.
According to Ernst and Young, 59 percent of companies in Southeast Asia expect to recover their pre-pandemic profitability by 2022, while 56 percent of them are looking to actively pursue mergers and acquisitions in the next 12 months.
Eighty three percent of the companies are also currently undergoing a business and technology transformation program, mainly driven by the impact of COVID-19 on their operations.
Vikram Chakravarty, EY Asean Strategy and Transaction Leader, said, in light of these trends, there is now a need for massive capital to fund the transformation and expansion of regional conglomerates.
Based on EY's survey, 46 percent of the companies in Southeast Asia believe they will generate most of their growth prospects within the region in the next three years.